PROVIDENCE – Standing to gain hundreds of millions of dollars in the wake of tax reform, Citizens Financial Group Inc. is sharing some of the wealth.
The Providence-based parent of Citizens Bank on Tuesday announced it would give 12,500 employees – representing about 70 percent of its workforce – a one-time $1,000 cash bonus totaling $12.5 million.
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The company is also contributing $10 million to its Citizens Charitable Foundation, which gives out grants and supports community programs.
“Corporate tax reform provides us an opportunity to recognize the role our colleagues have played in delivering better results for customers and shareholders, and to positively impact the communities where we live, work and play,” said Bruce Van Saun, chairman and CEO.
It’s difficult to calculate precisely how much the bank will save as a result of the new tax code, which was signed into law last month, and a spokesman declined to provide an overall estimate.
But John Woods, Citizens chief financial officer, discussed the potential impact of tax reform with investors during a Dec. 6 presentation at the 2017 Goldman Sachs U.S. Financial Services Conference in New York.
Assuming a Jan. 1 effective date, Citizens then-estimated 2018 net income would realize a mid-to-high teens percentage increase, reflecting a lower corporate tax rate of 20 percent, among other changes. In 2016, Citizens reported profit totaling $1 billion, representing a 24.4 percent increase compared with 2015.
Through the first nine months of 2017, the bank reported profit totaling $986 million, representing a 29.2 percent increase compared with the same prior-year period, according to regulatory filings.
Under the new tax law, the corporate tax rate dropped from a statutory 35 percent to 21 percent. Citizens, which was paying at a rate of 32 percent, reported 2016 income tax totaled $489 million, according to regulatory filings.
As a result of the tax reform, the bank also estimates a potential one-time tax benefit of between $325 million and $375 million, which will be realized on the payment of its deferred tax liability of about $750 million. The corresponding benefit to earnings per share could total 65 cents to 75 cents, according to the Goldman Sachs presentation.
Van Saun, appearing Wednesday on “Mornings with Maria” on Fox Business Network, said he’s optimistic the new tax law will help boost business lending, spur faster economic growth and increase interest rates.
“I think you’re going to see the animal spirits unleash a little bit as we get into the first half of the year,” he said.
Eli Sherman is a PBN staff writer. Email him at Sherman@PBN.com, or follow him on Twitter @Eli_Sherman.
